The Many Reasons to Still Own Abbott Labs

Written by: Marc Courtenay01/04/13 - 6:00 AM EST

Tickers in this article:
ABBV ABT

NEW YORK ( TheStreet) --This feels like deja vu all over again, as Yogi Berra famously phrased it. In the past few years whenever a successful company spins off a division it frequently leads to two chances to "buy low and sell high."

As you may have heard, Abbott Laboratories (ABT) completed its promised spin-off of AbbVie (ABBV) , which is a drug maker built largely around a drug called Humira, a best-selling rheumatoid arthritis injection that produced $7.93 billion in revenue during 2011.

As an ABT shareholder, I received shares of ABBV on Wednesday and when the shares rose over $35 I decided to sell. My intention was that if past spin-offs are any template for how the price of ABBV shares will act, I fully anticipate being able to buy those shares back for less than I sold them.

In a recent Bloomberg News story I learned that ABBV will "...seek treatments for unmet medical needs in a push to grow sales in 2015," according to the company's new chief financial officer.

"The competition is less keen to find drugs for conditions with few current therapies than for primary care," CFO William Chase told Bloomberg Thursday in an interview in New York. "AbbVie will focus on these illnesses, such as Parkinson's and endometriosis, a disease of the uterus, where the North Chicago, Ill.-based company already has treatments under development," he said.

That's the apparent good news about ABBV. The not-so-great news came later in the interview with the CFO. ""We're not going to be a primary care company going forward," Chase said. "What we're really looking for is specialty segments."

"The goal is for those products to come on line in 2015," Chase said. "In 2015, the pipeline will kick in and at which point we're confident AbbVie will return to growth, Chase said."

My stars, that's two years from now! Maybe we can buy shares between now and then at around $27, almost 20% below the opening day high.

Let me commend Chase and ABBV for disclosing that it'll be two years or more before the "return to growth." If ABBV adds even more promising blockbuster drug treatments to its product pipeline it may become a lucrative, high-performance company. Then its stock price is likely to rise well before 2015.

In the meantime, and until further notice, let's take the CFO at his word: "Until then 2015 sales likely will be little changed. The company will lose about $2.5 billion of what it projects will be $18 billion in 2013 revenue as patents expire, Chase said. The sales loss will be offset by more revenue from Humira and Androgel, a testosterone product."

Now let's consider ABT and what it has to offer investors going forward. Abbott is still a diversified health-care company with a market cap of over $52 billion. Its performance goals are focused across a broad portfolio of leading businesses aligned with favorable long-term healthcare and emerging market trends.